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In business, there are two types of people — businesspeople and those who are just people in business. This is true for the plumbing, heating and cooling service contracting business as well.
The just-people-in-business group wakes each morning with no game plan or an extremely flawed game plan. Then they wonder why things go badly. Their return on investment is usually low or nonexistent, and they often must put some more of their own money or extra sweat equity into the business to keep it afloat. Their stress and frustration levels are usually sky high, and they continue to come up with the wrong conclusions.
The first conclusion for the unsatisfactory results they get from their business is their customers are unrealistic, angry and unappreciative. The second reason is their personnel are, at best, mediocre. And their third excuse is the combination of the first and second reasons.
The truth is that there is only one reason they don’t get the results they want — they are just people in business and not businesspeople. Period. The only person they should blame for their poor results is the one they see in the mirror.
Businesspeople think like consumers and act like businesspeople. They know business is a numbers game. The first thing they consider is whether the area in which they choose to serve the public can handle the type of business they are proposing to open there.
If the area is inundated with plumbing, heating or cooling service contracting firms and has a finite number of consumers, as all regions do, saturating the area only leads to fewer consumers per PHC contracting business.
When this happens, the just-people-in-business group lower prices to levels below their true cost of operation to entice consumers to use them. They conveniently disguise this absurd practice by referring to their below true cost prices as the going rate. In truth, they should call it what it really is — the going broke rate.
Selling prices below their true proportionate, operational cost cannot mathematically allow them to earn a profit above their true cost. And selling at those prices is not only foolish, it’s the height of extreme stupidity.
PHC service contractors who are businesspeople look for an edge to put them above the mediocrity delivered by PHC contractors in their area who are just people in business — or they look for greener pastures in which to open their business.
Providing excellence, setting value
The second issue businesspeople must deal with coincides with the edge they have over the schlock dealers. After all, excellence costs more to produce than garbage. A counterperson at a plumbing and heating wholesaler once made a very profound statement to me in a conversation about the industry. He said, “I have yet to meet the second-best plumber.”
He referred to the braggadocious claims of self-praise made by a majority of plumbing contractors who couldn’t be a pimple on a real businessperson’s posterior.
To be the best, you must perform with excellence. This brings up another consideration of PHC service contracting businesspeople: hiring technicians. The goal is to recruit and hire techs who are presentable in their appearance and knowledgeable regarding the services they can perform for your clientele.
The just-people-in-business group hire technicians based on the following test: they hand the tech a wrench and if he or she doesn’t drop it, put a mirror under their nose to make sure they are breathing. If the mirror fogs up, they hire the tech.
PHC service contractors who are businesspeople look for integrity, loyalty, aptitude, mental attitude, self-motivation, excellence and the ability to follow legitimate orders before hiring someone who is often the only person representing their business to the public.
Then they constantly evaluate tech performance to ensure that top quality is always delivered to consumers.
Price buyers vs. value buyers
All consumers want that deliverance of excellence. However, keep in mind that consumers come in two groups: price buyers and value buyers.
Fortunately for you, if you are a businessperson rather than just a person in business — you are not only a contractor, you are a consumer. So, thinking like a consumer and acting like a contracting businessperson should come naturally to you.
If you embrace this contractor profit advantage, you will have the opportunity to be financially prudent as you sell your services above your true cost while honing your own selling abilities. Predetermine the consumer’s mindset, assure them you will take care of their needs in an excellent manner and stand behind your craft.
Price buyers want the best job at the lowest price, while value buyers are smart enough to know that excellence costs more than mediocrity. They understand they can’t get the best job at the lowest price.
Once you establish your edge over the competition, hire the best techs and deliver excellence, value buyers will become your long-term clientele. That’s because you were thinking like a value buyer rather than a price buyer, all while acting like a businessperson rather than just a person in business.
Price buyers require you to think like them. Once you understand where they are coming from, you must educate them by explaining their benefits due to the competitive edge your company has. If you get through to them, you will have an opportunity to turn them into a value buyer.
Since their primary concern is price, show them how your price is actually less expensive than the cheap guys. Set your prices in a manner that allows you, if it’s necessary to close the deal, to discount services without paying in part or totality for the costs you incur in serving their needs.
By that, I mean if you properly calculate your true cost and apply the profit margin that can get you where you want to go, you can increase your profit margin and discount the price of the task by the difference between your original desired profit margin and the one you raised. Price buyers always prefer discounts.
Warranties and service agreements
The mediocre contractors, more often than not and due to their questionable workmanship, offer no warranty policies — or very poor and unfriendly consumer warranty policies. Inform consumers that you offer extended limited labor warranties on your services for longer periods than your competition.
Since you deliver excellence, the cost to you for these warranties should be minimal. However, be aware that all services shouldn’t be warranted. For instance, you can warranty the replacement of a faucet, but it is unwise to warranty a repair to their existing faucet since you are putting new parts in a possibly deteriorated faucet body.
Offer to sell service agreements that include annual visual inspections of their plumbing, heating and cooling systems, discounts for tasks they purchase from you, and longer warranty periods. The consumer gets peace of mind while you bring in more money from the service agreement's sale. And when those consumers need service in the future, your business’s name is front and center in their minds. That’s thinking and acting like a businessperson who is taking care of their clientele.
Since the devil is always in the details, you may need help attaining your contractor profit advantage as it pertains to your true operational costs, profit margins, selling prices, business protocols, customer relations, hiring and evaluating star techs, extended limited labor warranties, etc. If so, just give me a call. Always think like a consumer and act like a businessperson.